Court Confirms Loss of 501(c)(6) Status by ABA Retirement Funds

The United States District Court for the Northern District of Illinois has ruled that the ABA Retirement Funds did not qualify as a tax-exempt section 501(c)(6) organization for tax years 2000 to 2002 because its performs services for individuals rather than for the industry as a whole and because it is engaged in a business normally carried on for profit, either of which characteristic would disqualify it for such status.  The court also found that the organization is not in the same general class a chamber of commerce or board of trade and was not an integral part of the ABA. 

While the ruling only addresses the specific tax years at issue, a Forbes article published when the ABA Retirement Funds initially filed its refund lawsuit states that the organization filed an application for exemption in 2004 but the IRS rejected that application in 2005.  According to this article, the exemption would have permitted the organization to avoid taxes on the marketing income its earns from promoting ABA-branded retirement plans.  The organization apparently outsources the actual management of its retirement plans to various third-party vendors that collect the fees related to those plans.

LHM